Scotland’s Public Finances: progress in meeting the challenges
Podcast script – June 3rd 2014 
I’m talking with Gordon Smail, project manager with Audit Scotland, about Audit Scotland’s latest report, Scotland’s public finances; progress meeting the challenges.
Gordon, can you tell me what’s this report about?
This is a follow-up to our 2011 report on Scotland's public finances. We’re providing an update on the financial position of public sector across Scotland, focusing on how bodies are meeting the ongoing challenges of reduced public spending. The report also provides guidance to public bodies that are operating under continuing budget pressures including councils, the NHS and central government bodies, by which we mean executive agencies and non-departmental public bodies.
And what have you found?
Public bodies have coped well so far with budget reductions in recent years, but more work is needed to budget based on priorities and to develop longer-term financial plans, all with the overall aim of maintaining and protecting services.
The total Scottish DEL budget has fallen about nine per cent in real terms since 2009/10; from a peak of £31.9 billion to £28.9 billion. Finances will continue to be tight and most bodies anticipate further funding cuts. Various factors will bring further pressures on public services, including the number of older people in our communities, who frequently need more services, such as health and social care, and the need to improve and maintain public assets such as schools, hospitals and roads. 
These pressures are not new, they’ve been clear for some time and will continue for the foreseeable future so it is essential that public bodies review their approach to budgeting and financial planning.  
You mention that this is a follow-up to a 2011 report on Scotland’s public finances – what are the key updates within this latest report?  
From 2009, the public sector came under increasing financial pressures. These pressures have not abated in the last five years, and further budget reductions and increased demand for services are expected. 
In this follow-up report we outline the high-level position across the public sector, which is the health, local government  and central government sectors. Funding for health and local government sectors will reduce in 2015/16; overall funding for central government bodies will increase slightly in the same period. There may be further reductions in budgets beyond this period but these have yet to be decided at both UK and Scottish Government levels.
We also provide a focus on what public bodies are doing at a local level to address challenges, and raise a number of important issues, including the need to focus more on priorities when setting budgets and the need for longer-term financial planning, all with the aim of ensuring services are sustainable and affordable.
What is the importance of this for the public? 
At a very basic level this about making the very best of the public money that is available for services. In other words making sure that it is spent to best effect to meet priorities that will most improve services for people and communities.
Scotland's public sector continues to face financial challenges. This combined with changes to Scotland's age profile, in particular changes to the welfare system, and the impact of the recent recession means there are increasingly difficult choices for public bodies to reduce spending. It is really important that public bodies plan effectively within these financial constraints, and to ensure service standards are maintained. 
What does Audit Scotland want to see happen as a result of this report?
We’re really highlighting two particular points here. We want to see public bodies focus on their priorities when setting budgets, making clearer connections between what they plan to spend and the outcomes that they hope to achieve. 
The second point is about seeing longer-term financial plans put in place, that consider the priorities and highlight any potential funding gaps and risks. 
Public bodies also need to improve the information provided to support the scrutiny of budgets. Effective scrutiny requires information that is reliable, relevant and timely. So alongside the report, we’ve published sector-specific checklists. These include questions on what information should be made available to support good decision making.  We would encourage all councillors and non-executive directors to use the checklists, to look critically at budget setting, financial planning and scrutiny of budgets, really to look at what’s working well and what more needs to be done to improve matters.